Bumpy ride ahead for the land transportation sector

OCBC Investment Research says difficulties will remain as beneficial effects from fare revisions will not be felt this year.

Here’s more from OCBC Investment Research:

For the month of May, the defensive nature of the two public transport operators (PTOs), Comfort Delgro (CD) and SMRT, has limited their losses against a backdrop of worsening equity market performance.

Although this market pull-back has resulted in lower fuel prices and provided a temporary relief for the PTOs, any upside potential remains limited at this juncture. We expect greater fuel consumption and increasing staff costs to negate any potential fuel cost savings resulting from the dip in fuel costs.

Furthermore, no fare adjustments are expected for the year, which will cause the trend of declining average fares to persist further. While a fare review committee has been announced by the government, any beneficial effects from revisions will only be felt in 2H2013.